Rationale

 The rating reaffirmation continues to reflect the extensive experience of the promoters and the company's established track record in the fermentation and semi-synthetic biopharmaceutical (API) business, spanning around two decades. Further, the ratings note strong financial profile, characterised by healthy profitability levels, robust debt protection indicators and strong liquidity. The ratings also factor in the company's key market player position in the global immunosuppressant therapeutic API segment, its strong R&D capabilities with adequate regulatory approvals and its reputed clientele with strong inflow of repeat business. The ratings are, however, constrained by the company's relatively moderate scale of current operations, its high therapeutic segment concentration and high working capital intensity, owing to the elongated receivable cycle and high inventory holding period. Given the high working capital requirements, along with the capex and dividend outgo, it has reported negative free cash flows in FY2020 and 7MFY2021, despite of having positive cash flow from operations and retained cash flows. Although it remains one of the key players and faces limited competition in the API segment, the formulation segment entails stiff competition from peers. ICRA also notes that the company is currently in the midst of a debt-funded capex for increase in API capacity at a total cost ~Rs. 400 crore. Despite low execution risk with major part of the cost already incurred and the company currently undergoing trial runs with the unit expected to commercialise from March 2021, achieving the healthy capacity utilisation levels with commensurate returns, through desired scaling up at reasonable size would remain critical. The Stable outlook on the [ICRA]AA-rating reflects ICRA's opinion that the company will continue to benefit from the extensive experience of its promoters in the biopharmaceutical industry and is likely to witness revenue growth, backed by new business garnered from the formulation segment and stable demand conditions for the API segment, supported by the ongoing capex for capacity enhancement.